Governments create poverty, only they can end it

Poverty, absolute poverty, is often the consequence of choices made by governments. Over time, only the things that governments tolerate that stand. So, where absolute poverty is the hallmark of a nation, the governments have failed in their obligations to their citizens.

Daron Acemoglu and James A. Robinson in their 2013 book, Why Nations Fail: The Origins of Power, Prosperity and Poverty, argue that nations are rich or poor depending on the political and economic institutions operating in them.

“Countries differ in their economic success because of their different institutions, the rules influencing how the economy works, and the incentives that motivate people,” these authors point out. The duo spent 15 years researching the subject matter.

Such institutions interact to determine the incentives for businesses, individuals and politicians. They posit that ``economic growth and prosperity are associated with inclusive economic and political institutions, while extractive institutions typically lead to stagnation and poverty”.

Most countries started off as poor nations. However, through the transformation of economic structures, many have progressively moved away from the preponderance of absolute poverty. The key to that is inclusive institutions.

Acemoglu and Robinson argue that nations are rich or poor depending on the political and economic institutions operating in them. Such institutions interact to determine the incentives for businesses, individuals, and politicians. They posit that ``economic growth and prosperity are associated with inclusive economic and political institutions, while extractive institutions typically lead to stagnation and poverty.’’

They further argue that the differences between poor and rich people cannot be explained by geography, climate, or disease, contrary to some postulations.

They support their position with two examples located far away from each other. One is the example of Nogales, a city divided by a fence. One side of the city lives in poverty; the other side lives in prosperity. Where is each part of the city?

Nogales Arizona in Santa Cruz Country is located in the USA. At the time of the research by the authors, the county had an average annual household income of $30,000, with a majority of adults being high school graduates and most of the teenagers in school.

Across the fence to the other side, just a foot away is Nogales Sonora, in Mexico. It had at that time an average annual household income that is just a third of that in Nogales

Arizona.

“What separates the two parts is not climate, geography, or disease environment, but the U.S.-Mexico border,” the authors declare.

The authors further cite the example of the two Koreas – South Korea and North Korea otherwise known as the Democratic Republic of Korea. After the surrender of Japan in the Second World War on August 15, 1945, its colony, Korea, was divided into two, but both fell to different political and economic systems: South Korea to be administered by the United States and North Korea was to be administered by Russia. By 1945, the living standard in Korea was the same, but today the average living standard of South Koreans is about ten times that in North Korea, the authors say. The reason again lies in the political economy and the systems they

Fast-forward to November 13, 2017. That day, a young North Korean soldier defected to South Korea. Anyone who watched the escape would appreciate the speed at which the determined guy moved on the lonely road towards the border. The twenty-four-year-old soldier drove a military jeep at a break-neck speed to his country’s border with the South. At a point, his vehicle got stuck to the ground, with his fellow soldiers closing in on him and shooting. He ran out of the vehicle and dashed across the demilitarised zone between the two countries, into South Korea.

Yahoo! News reported that the North Korean soldiers fired about 40 shots at their defecting colleague, who was hit about 5 times.

Yahoo! News further reported that as South Korean doctors treated the defector for his bullet wounds, they found in his intestine large parasitic worms, with some of them as long as 11 inches. Yahoo! News said that these worms had long been eliminated in South Korea. The worms were said to be associated with persons whose food has something to do with human waste.

“The economic disaster of North Korea, which led to the starvation of millions, when placed against the South Korean economic success, is striking: neither culture nor geography nor ignorance can explain the divergent paths North and South Korea. We have to look at institutions for an answer,” our authors say.

Two events germane to this topic took place in the country last week. Let us take the second one first. On Saturday, May 1, human rights activist and lawyer. Dr. Olisa Agbakoba, spoke on the Platform, the annual conference organised by the Senior Pastor of the Covenant Christian Centre, Lagos, Poju Oyemade, where prominent Nigerians discuss critical national issues.

Agbakoba spoke on the theme IS DEVOLUTION OF POWER

SOLUTION TO NIGERIA’S PROBLEM? His thesis was that fighting poverty, not power devolution, should be Nigeria’s priority now.

He contended specifically that in this regard, state governors have a big role to play in the emergence of a Nigeria with less poverty. Referring to Chinua Achebe’s book, “The Trouble with Nigeria,” Agbakoba, a former president of the Nigeria Bar Association, declared that the trouble with Nigeria is not the Constitution. The trouble with Nigeria is leadership.”

“So, a lot depends on accountability, on leadership qualities, coming out of our governors because, at the end of the day, the federal government is only a small fraction of the Nigerian equation.

“But the governors seem to have retreated and do no more than go to Abuja to ‘collect’. While he did not identify what the governors (or their representatives) go to Abuja to collect, the reader knows. It is the FAAC ALLOCATION.

FAAC ALLOCATION, as currently managed by the state governments, cannot be an enduring solution to Nigeria’s poverty. A lot of it goes into meeting recurrent expenditures, which have little to do with creating capacity for tomorrow. The state must find creative, entrepreneurial ways of transforming these monthly allocations to domestic capacity that can spur inclusive growth. This will be achieved through the creation of inclusive institutions that can domestic wealth creation in an allinclusive setting.

The other event was the approval by the Federal Executive Council of the National Poverty Reduction with Growth Strategy, which was submitted to the government by the Presidential Economic Advisory Council. The approval took place at last week’s meeting of the FEC, where also Vice President Yemi Osinbajo was appointed chairman of the steering committee to provide overall guidance for the implementation incorporated into the Medium-Term National Development Plan 2021-2025 and Agenda 2050. The FEC also went further to direct the AttorneyGeneral of the Federation and Minister of Justice, Abubakar Malami, to prepare a bill for submission to National Assembly to make the implementation of the strategy sustainable.

Nigeria was reported in 2018 to have become the world’s poverty headquarters for having the largest number of people living in extreme poverty. We earned that inglorious accolade as a result of the cumulative failures of the nation’s governments to address poverty fundamentally.

Over the years, our governments have tended to treat the symptoms of poverty or its effects rather than its causes. The time has come for a new approach.